Unless you have the cash to purchase a home outright applying for a mortgage will be necessary. The cash-purchase route is a better option in the long term, but mortgage debt is not as bad as other debt burdens, because you are investing in something you will eventually own. Before applying for a mortgage get together with your spouse, and discuss your housing needs with your realtor or a loan specialist at your bank. There are online resources for mortgage calculations can help you as well.


mortgage application online

Mortgage Basics
The mortgage process can be stressful, but knowing what to expect will make it go more smoothly. The following are some primary qualifications you'll need.


Underwriters will scrutinize your financial history, but you stand a better chance of qualifying by passing the aforementioned qualifications.

You should create a financial plan to see how much you'll need to purchase a home and whether you qualify. If you find yourself under-qualified, draft a plan to develop ways to increase your income, reduce your debt, and improve your credit score.


couple talking to a banker

Credit Scores

A good credit score is crucial because underwriters assess your trustworthiness as a borrower, and your credit determines your interest rate. For example, you can obtain a mortgage with a score below 620, but it is difficult to qualify, and you may find yourself stuck with higher interest. A credit score of 740 or higher puts you on better footing in terms of approval and a lower interest rate.


Solid Income

Your income level determines your interest rate. If your income needs improvement, put underwriters at ease by finding solid ways to increase your family's monthly cash flow.

Your income is balanced against your debt obligations producing a debt-to-income ratio. If your debt outweighs your income, you will need to settle delinquent accounts before applying for a mortgage. Contact a financial consultant to learn what mortgage companies look for in terms of debt-to-income ratio, and take advantage of savings engines like Squeeze to monitor your spending habits and save money. You may also consult online tables and debt/income ratio calculators to understand where you stand vis-a-vis mortgages.


women on a hammock relaxing


Stability is key when applying for a mortgage. Underwriters want to know that you have a steady job and earn a consistent stream of monthly income. Also, lenders check your background twice during the mortgage process to ensure that your job or debt situation has not changed. Don’t incur heavy debts or quit your job during the mortgage process. Doing so will disqualify you.


Know Your Down Payment

After approval, you must be able to produce a down payment of 20 percent of the purchase price or your new home. If you cannot afford a down payment, consider applying for a Federal Housing Administration (FHA) loan at 3.5 percent. The FHA down payment loan comes with other perks in the form of lower mortgage insurance premiums, and they are a cheaper option for first time home buyers.


Happy house hunting for that special home sweet home.